Why We Think A Land Contract is better than a handshake
Why we use a land contract
Are you intimidated by all the legalese in today’s real estate contracts? If so, not to worry. We use a land contract because of its simplicity and the fact that we don’t have to ruin your credit if we have to foreclose.
What’s a land contract you ask? It’s simple. A land contract is an agreement between a buyer and seller of property in which the buyer makes payments toward full ownership (as with a mortgage), but in a land contract, the title or deed is held by the owner until the full payment is made. This type of contract is technically not a legally binding agreement and, therefore, many different types of payment formats can be found.
As in a standard mortgage, there is an agreed upon price and payment schedule, but the payments are often not amortized evenly, so that a large balloon payment may be required to complete the purchase. Also known as an installment purchase contract or an installment sale agreement.
Often, you’ll see a more standard lien with a deed of trust. However, if you miss a payment with a deed of trust, then the seller has to go to court, file a foreclosure action and literally wreck your credit for 10 years. A house investment usually costs hundreds of thousands of dollars, but raw land may not even cost a thousand dollars! As a result, we don’t believe we should encumber the property with a deed of trust when a land contract can provide the buyer more flexibility.
However, you have to be careful with a land contract. An unscrupulous seller can easily double sell a property since the lien isn’t recorded with the County. As a result, you must be careful and be certain your seller has an excellent reputation prior to signing a land contract.
We use a simple two page land contract. Our land contract has the terms of the sale, and what needs to be done in the case the buyer misses a payment. We value a simple land contract over complexity. This is why we consider our land contract the same as old school land selling.
Remember the days when you’d shake hands and knew you had a deal? Our land contract is the 21st century version of the handshake. If you’d like more information, or want to see a copy of the land contract we use prior to signing just contact us.
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